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What Does it Cost (Part 1)

The Overview
I normally like to have a little fun in the blogs that I write and maybe even take the occasional jab at our CFO Mike Jones (all kidding aside about pink shirts and what not he is a really great guy). This blog is intended to have more of a educational goal, and since there is a lot to take into consideration I won’t be able to make any pink shirt cracks, and the reason for this is because I’ve had a lot of conversations over the past year or two in which the question that always comes up is “How does SoftLayer compare to colocation and what is the better move for me?” We’ll look into this further throughout the blog series.

I was fortunate enough to be invited to attend the Network World IT Roadmaps events in both New York and Atlanta earlier this year. Now what motivated me to put fingers to keyboard here is the perspective I gained from many people that I talked to during and after the conference. I consider myself to be fortunate to attend because it is rare that SLales staff is able to join in on the marketing campaign and work with people more on a face to face basis. Normally SoftLayer Sales member cannot really help our customers if we are not at our desk to take their calls, chats, emails, or tickets. I enjoy attending events like these because it seems that you can learn so much more speaking with someone face to face as opposed to just over a phone call or email.

Since this was not my first go around with the Network World events I was more familiar with the setup and I was able to take more in from the people speaking at the event. There are some common themes that can affect business from the technology side of things, and if you want to have growth you must invest into your own infrastructure and your own technology. If you are a small mom and pop shop that is fine with maintaining the status quo it may not be as vital for you, but then again you wouldn’t be reading this blog post now would you? The themes I saw (broken down into more simple context) were based around some basic principles.

A company is a grouping of people working for a common goal. Your people are your most valuable asset and it is important to put them in positions where they can be successful and ultimately you will be successful as well.

The Wayne Gretzky quotes of “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be”, and following that up with “I skate to where the puck is going to be, not where it has been” these have a common sense idea that if you are not looking to the future and figure out what is coming next then you will always be trying to catch up. If you are not innovating or growing then ultimately you are dying.

How can I get more? We are constantly pressured to do more with less, or at least get more out of what we already have. This is probably the biggest and most frequent question we all get no matter what our business model is and what we try to achieve.

There are, of course, many other themes than the ones I have just listed and more specific ones too. Even though I certainly took much more away these were some of the main takeaways that brought me back to an always evolving answer to the same question that every speaker seemed to dance around - “What does it cost?”

No matter how big you are or how much budget you have in place there will always be different options presented to you on how to build up your infrastructure. I have no doubt that you have asked yourself the question of what will it cost in relation to many things and possibly asked yourself in many different ways. Making comparisons to figure out what is the cost and what will give me the best possible results is the end goal we are trying to reach. But how can we get there? It can be very difficult to compare data centers to each other in an apple to apples fashion. There are simply too many variables to note in making this all come forth full stream. My goal is to try and help us all tackle this broad issue, and hopefully it will lead to more discussion about pros and cons so that it can be easier to determine the best course of action in future planning.

There are a lot of things to consider in the cost of running a data center. It seems like a never ending list of essential things that cost both money and time (which in some cases can be more valuable). In this series of blogs we’ll break specifics parts of a data center down into the basics of several areas that you’d need to consider. Once we get into the basics we’ll want to look back to ask “what does it take to run a data center?” Most often people only look at the most tangible items with the easiest metrics to apply which essentially comes down to the server hardware, power, space, and bandwidth. Sometimes these are the only things that people look at in making this decision.

Depending who you are and what you want to get out of your data center this could be close to what you’d need to consider, but for 99% of the population who has any business with a data center this only covers the basics. As a society convenience plays an ever increasing role in what we look for and in addition to this 99% looking for data center infrastructure crave things like uptime, speed, reliability, and space/opportunity for scalability and expansion. Each of these things are more than just desires, they are verified needs.

So in getting to the meat of what this blog is about I’ll quickly discuss the different things that add to the total cost beyond the obvious things of Hardware, Space, Power, and Bandwidth. I know this is already pretty long for a blog so I am turning this into a short series and I will follow up with addition blogs to go into more depth about each portion and how they can relate to each other. I will work to add insight from other customers who have asked this of themselves before in addition to giving my own experiences on this topic.

Opportunity Costs
I consider the idea of Opportunity Costs to be amongst the highest and least quantifiable aspect in running a data center. This isn’t something that will have its own blog post because of its broad nature, so instead I’ll simply tie the idea of Opportunity Cost into each other blog and how it relates to the overall discussion.

There is often a simple truth to knowing or stating that if we choose option “A” it will negate the value, relevance, and in many cases the existence of any other previously viable options. Nearly all Opportunity Costs relates back to What Does it Cost by determining what is potentially to be either gained or lost with that decision. This idea can be further broken down into risk vs. reward, and a simple business decision in knowing that if you wish to take on less risk, you’ll need to pay more for it or get less in return. The same can be said for intangibles other than risk like convenience, reliability, and speed.

Human Resource costs
Earlier, I mentioned that one of the main topics of discussion that guest speakers emphasized was that Our people are our biggest assets, but at the same time they can also easily be one of our biggest costs. I think that a lot of businesses can agree with this statement, however, the impact from how we develop our infrastructure does not often take our people and associated costs into account. Every business should have a growth model the cost of growth (or your growing pains) is often overlooked in the planning stages. We’ll look at specific situations and take into account amount of people needed running everything yourself and what that will wind up costing from just the HR standpoint.

This can get more into what is the cost of adding one more qualified employee. This is one of the biggest aspects often overlooked, because it not only takes new people you would need to hire, but how it can monopolize time and production you would get otherwise from people you already have on staff.

The value of "On-Demand" and the cost of not having it.
Have you ever heard the phrase “time is money”? What does this mean to you? What can this mean in a data center? Here we’ll focus the conversation on efficiency and the compare certain costs and benefits between different ways about achieving our goals.

We can take a look at standard processes that we may have to go through if we wish to add capacity as well as integrating new solutions with existing ones. Time has a huge value in today’s business world, and we’ll determine how having on demand infrastructure has the ability to positively impact the bottom line immensely. Having necessary tools in a truly on-demand and versatile environment will be a major point of focus in everything moving forward, and it is an important intangible factor that we should not lose sight of.

Cost of Uptime/ Redundancy
Uptime is one of the most common themes near the top of everyone’s list for data center management. We can all agree that uptime is important, but how important is it to us each individually? We will look at scenarios where if a catastrophic event were to happen we should ask ourselves what it would cost not only in terms of monetary value, but also what would that mean long term and on a strategic level.

Downtime will eventually happen in all things, but if you can plan around this to have redundancy or failover then you can alleviate this risk. So we must again ask ourselves “what will this cost?” Simply put Redundancy can and will be expensive. Generally it will cost much more than just the sum of its parts and it is easy to over look certain aspects of where you may have a “single point of failure”. At the same time we should consider what will the cost be for each additional level of redundancy that we incorporate?

Contracts
In this blog we will relate focus heavily on two main ideas: The value of time in making long term decisions and Opportunity Cost. We’ll be able to look at what having long term commitments really cost in ways that include scalability, large capital costs, accounting on physical resources and their benefits as well as limitations. Once we have this established we can also more easily determine how this can affect your decision making and your ongoing ability to do the right thing for your business.

Accounting
Different accounting practices can make a great difference in your bottom line. Carrying on additional debt, taxes, and taking depreciation can have a lot of costs that go beyond the normal operating costs. For this section I’ll warrant the help of some of our experts who have already previously run several scenarios and may be a bit more qualified than I am to speak on such matters.

In the end this study can make it easier to compare and see if SoftLayer is the right solution for you or someone you may know. I can say that SoftLayer will not be the entire solution for some companies compared to doing things yourself, however, we do make sound business sense in about 95% of cases at some capacity if not full capacity.